ELK GROVE VILLAGE, Illinois (Reuters) – Shareholders of United Airlines parent UAL Corp and Continental Airlines Inc approved the merger of the two companies on Friday to form the world’s largest air carrier.
Wall Street’s bad guys continue to multiply even though their idol, Bernie Madoff, currently serving a 150-year jail term, would be the first guy to tell them that crime doesn’t pay.
Indicative of this accelerating bad guys trend is the stepped-up number of insider trading probes by two of Wall Street’s leading regulators on the securities beat — the Securities and Exchange Commission (SEC) and the Financial Independent Regulatory Authority (FINRA), which oversees nearly 4,700 brokerage firms.
Both, I’ve learned, have recently kicked off investigations into the stock trading of a trio of prominent companies prior to their receiving well publicized buyout offers in recent months totaling about $58.5 billion.
These fresh, unreported investigations center on what one aspect of Wall Street killings — the illegal kind — are all about. In brief, you buy a stock and you’re lucky. Some firm steps in and makes a bid for the company at a sizable premium to the existing share price and you reap a big gain as the price of the shares balloon.
Then again, maybe you weren’t so lucky. Maybe it was a sure thing transaction. Maybe you bought the stock after obtaining privileged, non-public information, which is precisely what Gordon Gekko did before winding up in jail.
That’s basically what the SEC and FINRA are looking into with regard to the three takeover offers in question. They involve:
–The $38.6 billion hostile bid by Australian-based BHP Billton, the world’s largest mining company, to acquire Canada’s Potash Corp., the globe’s biggest fertilizer supplier. The bid was rejected.
–An $18.5 billion offer by French drug maker Sanofi-Aventis to buy Genzyme Corp., a leading U.S. biotech company. That bid was also rejected.
–A $1.2 billion offer by Hertz Corp., later raised to $1.43 billion, to acquire a rival in the rent-a-car business, Dollar Thrifty Automotive.
It’s all very legal, of course, to buy the shares of a takeover candidate, but not if you have precise knowledge of an impending buyout offer that has not been publicly disclosed. That’s not playing the game on the up and up. If you’re caught cheating — namely, illegally trading on inside information — you can, as you well know, get hit with a hefty fine, join Madoff and Gekko in the clink, or both.
With the mergers and acquisitions game heating up, thanks to low interest rates, strengthened balance sheets, a desire by companies to beef up their growth prospects in a weak economic environment and pent-up efforts by overseas corporations to crack the U.S. market, the opportunities to beat the system with inside knowledge of non-publicly announced deals have become much greater.
Apparently suspicious that some unethical trading may indeed have taken place in the shares of Potash, Genzyme and Dollar Thrifty Automotive, the SEC and FINRA in recent weeks sent out inquiries to the brokerage community in which they specifically requested the names of any clients who traded in these securities both in domestic and foreign markets in specific time periods.
It’s unclear whether any of the investigations mentioned here extend beyond the trading in the companies’ securities.
Both agencies declined comment, but I have obtained copies of internal SEC and FINRA documents from a regulatory contact that detail the three investigations.
In addition, both agencies recently initiated a number of other stock trading investigations, with energy companies particularly conspicuous. Again, I have gotten my mitts on copies of regulatory documents detailing these investigations.
Included here are SEC probes into such stocks as Valero Energy, Hess Corp., Adobe Systems, Transocean, Ltd., Occidental Petroleum, Valeant Pharmaceuticals International, Annaly Capital Management, Lennar Corp., Hewitt Associates, Americredit Corp., BMC Software, Halliburton, Cameron International and Las Vegas Sands.
Meanwhile, FINRA, the documents show, is probing the trading in such stocks as Priceline.com, BJ’s Wholesale Club, Atlas Pipeline Partners, L.P., Prospect Medical Holdings and DigitalGlobe.
What does it all mean? That insider trading is far from dead and the securities industry’s cops monitoring the Wall Street beat probably need more handcuffs.
I don’t want to sound like a broken record, but about a year ago I wrote a similar kind of piece on stock trading investigations and tried to explain why there are so many bad guys on Wall Street.
One answer — “Because our product is money and money attracts scum” — was given to me then by Malcolm Lowenthal, a stockbroker at Kern Suslow Securities. That covers it all.
What do you think? E-mail me at Dandordan@aol.com.
The bulk of the media often gets pulled along for the ride when the United States government has a serious political and public relations campaign around foreign policy. But almost nowhere is it so monolithic as with Venezuela. Even in the run-up to the Iraq War, there were a significant number of reporters and editorial writers who didn’t buy the official story. But on Venezuela the media is more like a jury that has twelve people but only one brain.
Since the Venezuelan opposition decided to campaign for the September elections on the issue of Venezuela’s high homicide rate, the international press has been flooded with stories on this theme – some of them highly exaggerated. This is actually quite an amazing public relations achievement for the Venezuelan opposition. Although most of the Venezuelan media, as measured by audience, is still owned by the political opposition there, the international press is not. Normally it takes some kind of news hook, even if only a milestone such as the 10,000th murder, or a political statement from the White House, for a media campaign of this magnitude to take off. But in this case all it took was a decision by the Venezuelan political opposition that homicide would be its main campaign issue, and the international press was all over it.
The “all bad news, all the time” theme was overwhelmingly dominant even during Venezuela’s record economic expansion, from 2003-2008. The economy grew as never before, poverty was cut by more than half, and there were large gains in employment. Real social spending per person more than tripled, and free health care was expanded to millions of people. You will have to search very hard to find these basic facts presented in a mainstream media article, although the numbers are hardly in dispute among economists in international organizations that deal with statistics.
For example, in May the UN Commission on Latin America and the Caribbean (ECLAC) found that Venezuela had reduced inequality by more than any other country in Latin America from 2002-2008, ending up with the most equal income distribution in the region. This has yet to be mentioned by the major international press.
Venezuela went into recession in 2009, and you can imagine how much more press attention has since been paid to GDP growth there than when Venezuela was growing faster than any economy in the hemisphere. Then in January the government devalued its currency, and the press was forecasting a big upsurge in inflation, to as much as 60 percent for this year. “Stagflation” – recession plus rising inflation – became the new buzzword.
The “out-of-control” inflation didn’t happen – in fact, inflation over the last three months, which is 21 percent at an annualized rate, is considerably lower than before the devaluation. This is yet another indicator that the economists relied upon by major media as sources have limited understanding of the actual functioning of Venezuela’s economy.
Now it looks like Venezuela may have emerged from its recession in the second quarter of this year. On a seasonally adjusted annualized basis, the economy grew by 5.2 percent in the second quarter. In June, Morgan Stanley projected that the economy would shrink by 6.2 percent this year and by 1.2 percent next year. The International Monetary Fund (IMF) is projecting long-term gloom and doom for Venezuela: negative per capita GDP growth over the next five years. It is worth noting that the IMF gave the authors of “Dow 36,000” some competition for creative forecasting, with their repeated, wildly off-the-mark underestimates of the Venezuelan economy during the expansion.
All this may seem like par for the course if we compare with coverage of the world’s largest economy – the United States – where the vast majority of the media somehow missed the two biggest asset bubbles in world history – the stock market and then the housing bubble. But there were important exceptions here, e.g. the New York Times in 2006. With Venezuela – well, you get the picture.
Of course Venezuela’s continued growth is not assured – it will depend on the government making a commitment to maintaining high levels of aggregate demand, and keeping it. In that sense its immediate situation is similar to that of the United States, the Eurozone, and many other more developed economies whose economic recovery is sluggish and uncertain right now.
Venezuela has adequate foreign exchange reserves, is running a trade and current account surplus, has low levels of foreign public debt and quite a bit of foreign borrowing capacity if needed. This was demonstrated most recently in April with a $20 billion (about 6 percent of Venezuela’s GDP) credit from China. As such, it is extremely unlikely to run up against a foreign exchange shortage. It can therefore use public spending and investment as much as necessary to make sure that the economy grows sufficiently to increase employment and living standards, as it did before the 2009 recession. (Our government in the United States could do the same, even more easily – but that does not appear to be in the cards right now.) This can go on for many years.
Whatever happens, we can expect complete coverage of one side of the story from the media. So keep it in mind: when you are reading the New York Times or listening to NPR on Venezuela, you are getting Fox News. If you want something more balanced, you will have to look for it on the Internet.
This article was published by The Guardian Unlimited (UK), September 11, 2010
The kings of the earth, and the great men, and the rich men, and the chief captains, and the mighty men, and every bondman, and every free man, hid themselves in the dens and in the rocks of the mountains; And said to the mountains and rocks, Fall on us, and hide us from the face of him that sitteth upon the throne, and from the wrath of the Lamb: For the great day of his wrath is come; and who shall be able to stand? – Revelation 6:15
Every normal man must be tempted at times to spit on his hands, hoist the black flag and begin to slit throats. -H. L. Mencken
This is the Money season.
The mid-term elections are under fifty days away and the running campaign dialogue is about the economy, Jack; jobs, taxes, stimulus and deficit. In 2002 it was Vengeance, 2006 Anti-War; this time around it’s Money. And since there are only two political parties to choose from, they’ve opportunely split the baby on how Money is created, saved, spent, utilized and doled out; from the private sector to Washington D.C. Thing is, it’s important to come to grips with the fact that there will be nothing new offered by either faction. What the “new” Republicans have in mind, whether it’s the No Government Tea Party enthusiasts or traditional party hacks, it will be no different than Goldwater or Reagan or Gingrich. And what the Democrats counter with will be another healthy dose of FDR, Clinton and Pelosi/Obama.
Not one candidate you will hear from has the guts to tell you what the real deal is. I dare you to find them.
What’s the real deal?
For starters the always popular idea that the national deficit is killing businesses, crushing the dollar, spiking unemployment and laying out a death sentence for our children will be discussed in general terms but with no solutions. This is because fifty percent of the American public eligible to do so fails to pay taxes. Another fifty percent of said public is receiving entitlement payouts.
No money coming in and tons going out creates a deficit; from the corner lemonade stand to General Electric. There is no new math. It’s the same shit.
Now, what you’ll get is Republicans repeatedly pointing out both of these factoids, but with a glaring refusal to face the obvious: The nose-pinching decision to either raise taxes, overtly enforce or enhance the current tax laws, or cut a heaping share of entitlements.
All of these “options” are, of course, political suicide, even in a year wherein anyone not in charge is an acceptable alternative, no matter how brainless or bizarre. Not even conservatives have the balls to start fucking with people’s entitlements. That went the way of Calvin Coolidge and his doom-struck clan. Even the Mighty Ronnie Reagan saved Social Security and when the Lords of Newt scared enough of the elderly, they ran to the booths to re-elect the Minister of Fun.
What about hammering away at tax cheats, loopholes and shelters?
Sure. This will happen. Next week.
Only the Democrats will start pitching that kind of nonsense, couched in atavistic Middle Class warfare rhetoric and the always-gangbusters anti-rich miasma, conveniently forgetting that from the dawn of civilization it is the ones with the Money who put Money on the Money tree. And since this is the Money Season, and definitely not the Democrat Season, this would also constitute a hot steaming bowl of political suicide.
But its desperation time in Dem Land and tossing out unconstitutional pogroms on the wealthy with randomly shifting tax laws, whether the ones in their favor or to penalize them, is expected. Not unlike Republicans suggesting emergency amendments denying another small segment of society — two percent or so — the right to marry.
Hey, as long as we’re deep into the Money Season, it can’t go without saying that this country has always been schizophrenic when it comes to the rich, from celebrities to moguls. We worship them, dream of becoming them, but despise them to the point of wanting to siphon their funds to lighten our tax burden.
This segues neatly into the approaching deadline to extend, revise or let go of the so-dubbed Bush Tax Cuts. Of course none of these options does a thing for the aforementioned national debt but pile upon it.
The Republican plan to perpetuate a non-funded hand-back raises the deficit three trillion. The Democratic plan to revise it and punish the top two percent of the economic equation jacks it to four trillion. No one, not one candidate or political play we are faced with does a thing to stop the deficit from climbing, let alone decrease it.
Meanwhile, as the country was temporarily distracted by a 9/11 hoax hatched by superstitious goobers using their voodoo tome to motivate the burning of a rival’s superstitious falderal, the United States government was selling billions of dollars of weaponry to the very country from which our attackers and their mastermind hail, Saudi Arabia. A supposed American ally, just as the Afghans, Saddam Hussein and lately the backstabbing Pakistani government before them, the Saudis will likely gather taxpayer funded firearms to turn on us in a generation.
Perhaps that would be Money best used to tackle the above issues, but then selling weapons to the world is one of our hottest commodities, like construction, food and engines. It’s just that unless it’s killing machines, we import twice as much as we export, another recipe for economic woes and political fallout.
Hell, like it or not — or having a political solution or not — there is not much wiggle room on either raising taxes or cutting benefits to lower the deficit or risk playing roulette with the tax laws in a time of economic crisis.
Oh, and by the way, this whole deficit whining is mostly a scare tactic. Non-partisan experts pretty much agree that with the lowest interest rates on record the deficit is actually more manageable now than thirty years ago. It’s better to keep money in the pockets of those who can and will use it to create jobs and loan or borrow Money, perhaps even, if miracles are still available to us, create new and improved manufacturing vocations for a change. Many of the same experts figure it’s been a little over twenty years since the U.S. of A. has done anything close to that.
So hard choices need to be made and difficult truths need to be uttered.
None of this is forthcoming from anyone.
Read more: Taxes, Fdr, Mid-Term Elections, Tea Party, Stimulus, General Electric, Social Security, Ronald Reagan, Money, Budget, Economy, Tax Evasion, Bush Tax Cuts, Deficit, Saudi Arabia, Weapon Sales, Politics News
By Devon Swezey and Jesse Jenkins
It is fashionable these days to paint the government as a useless yet ravenous institution, the expansion of which will turn America into a third world country – or, worse yet, France.
Even the Economist, a respected, moderate publication, has recently taken to framing the government as a hideous Leviathan consuming private business, and everything else in its path.
But according to a new column by conservative commentator David Brooks, the hysterical, anti-government ideology that has taken root within even mainstream corners of the Republican Party is driven by an “oversimplified version of American history, with dangerous implications.”
Writing in the New York Times, Brooks reminds his fellow conservatives that the history of American innovation and economic strength is one of “limited but energetic governments that used aggressive federal power to promote growth and social mobility.”
“George Washington used industrial policy, trade policy and federal research dollars to build a manufacturing economy alongside the agricultural one. The Whig Party used federal dollars to promote a development project called the American System.
Abraham Lincoln supported state-sponsored banks to encourage development, lavish infrastructure projects, increased spending on public education. Franklin Roosevelt provided basic security so people were freer to move and dare. The Republican sponsors of welfare reform increased regulations and government spending — demanding work in exchange for dollars.”
Certainly, this country’s innovative private businesses and intrepid entrepreneurs have been central to making America the world’s leading economy. But time and again, America’s entrepreneurs have succeeded with the full and active support of the federal government, without which, things may have turned out very differently.
As the Breakthrough Institute documented in our 2009 report, “Case Studies in American Innovation,” the story of American innovation is one of enduring partnership between the public and private sector, where smart public investments have catalyzed entrepreneurialism and innovation and paved the way for so many of the great American technological and economic success stories of the 20th century.
Time and again, public-private partnerships have driven the development of whole new industries, and created the conditions for leading private sector companies to thrive. Without the public sector as both an initial funder and demanding customer, the vibrant industries built around great American innovations in communications, aerospace, semiconductors, computing, biotechnology and many more may have sprouted up elsewhere, or not at all.
Giving credit where credit is due, former Microsoft Chairman Bill Gates, one of the nation’s greatest entrepreneurs and business leaders, recently noted that early government investment in information technology was central to the success of Microsoft and so much of the IT revolution that propelled Americas economy in the later years of the 20th century:
“The Internet and the microprocessor, which were very fundamental to Microsoft being able to take the magic of software and having the PC explode, were among many of the elements that came through government research and development.”
Indeed, the catalytic investments of the federal government have been central to the success of countless leading American firms, including HP, Apple, Genentech, Boeing, and Dow Chemical, along with hundreds of the small businesses and entrepreneurs that are the core of America’s economic strength.
According to R&D Magazine, a quarter of the top 100 innovations in America each year consistently come from small businesses that are funded by one federal program alone–the Small Business Innovation Research (SBIR) program.
Many conservatives, and indeed many liberals and environmentalists as well, have forgotten this history, and believe that the private sector is most innovative when the government is most absent.
Yet, as Brooks reminds us, the greatest American Presidents, from Washington to Lincoln, to Roosevelt, didn’t build their philosophies or their policies around small government or big government, but smart government:
“Government is a means, not an end. They built their philosophy on making America virtuous, dynamic and great. They supported government action when it furthered those ends and opposed it when it didn’t.”
This “long, mainstream American tradition” is imperiled by the reflexive anti-government ideology of the surging Tea Party, now fighting for the soul of today’s Republican Party.
For America to remain a great nation in the 21st century, smart government policies and investments will be essential. Whether or not those pivotal investments are made may hinge on the ability of conservatives and liberals alike to overcome this collective amnesia about what made this country great in the first place.
This post originally appeared at the Breakthrough Institute
The Census Bureau reported yesterday that over 43 million Americans are living in poverty —the most recorded in 50 years and the highest rate since 1994. So that added urgency to the efforts of progressive activists, led by Jobs With Justice (JWJ) and Progressive Democrats of America, in organizing mostly small-scale protests in 100 cities Wednesday to prod political leaders to do more to respond to the jobs crisis.
“When Wall Street was in crisis, Congress found hundreds of billions of dollars to bail them out. We need to respond to the jobs crisis with the same urgency,” says Sarita Gupta, the director of Jobs With Justice, a group of local labor, faith and activist coalitions involving 1500 organizations in 47 localities (hat tip to Center for Media and Democracy).
There’s at least one important jobs bill that realistically could get still get passed in this Congress: the Temporary Assistance to Needy Families emergency fund through which 37 states have provided subsidized jobs for nearly 250,000 otherwise unemployed parents and youth. The bill has passed the House, but it has been, predictably, held up in the Senate despite support from small-businesses, and even state and local Republican officials. “We hope we can make a difference about what some local politicians do about the TANF funds that are about to run out [on Sept. 30th],” observes JWJ communications coordinator Allison Fletcher Acosta.
In Chicago, roughly 300 unemployed people and labor activists rallied outside the GOP headquarters to protest the jobs voting record of the GOP’s Senate candidate, Rep. Mark Kirk, in one of the country’s tightest races. Led by the Chicago Jobs with Justice’s Unemployed Workers Council, the activists united to demand immediate action to create jobs. “We need jobs and until we get them of course we need unemployment benefits. Mark Kirk is voting against both”, said Carole Ramsden, an unemployed union electrician and member of the Chicago JwJ Unemployed Workers Council.
As a JWJ press release noted, on August 10th, Kirk promised to vote to support legislation that would have prevented layoffs of teachers for local school districts facing budget shortfalls due to the ongoing economic crisis. One day later, in Washington, Kirk reversed himself and voted against the legislation—but Congress passed the bill without his support.
The press statement declared:
“Our kids need teachers, and our economy can’t withstand more job losses. This bill saved 6,000 jobs in Illinois. Why on earth is Kirk voting against that? Because it adds to the deficit? Well, then why does he support extending the Bush tax cuts for millionaires and billionaires?” asked John Kugler of the Chicago Teachers Union.
Kirk has also voted repeatedly against extending unemployment benefits since November 2009, again attributing his opposition to an unwillingness to add to the budget deficit despite the general consensus among economists that in aneconomic downturn short-term deficit spending is preferable to further shrinking the economy by ending benefits to the unemployed. Furthermore, Kirk has said he favors extending the Bush Administration’s tax cuts for millionaires and billionaires which would add over $100 billion to the national debt.
But there’s a striking contrast between the ambition of the Jobs With Justice goals, echoed by a call Thursday by 300 progressive economists for job-creating spending over deficit cutting, and the grim political reality in Washington in which “stimulus” has become a dirty word thanks to conservative Swift-Boating that Democrats responded to too late.
In fact, the unemployment extension that was part of the original stimulus and subsequent bills — opposed by most Republicans — kept over three million more people from descending into poverty. As the Center for Budget and Policy Priorities’ executive director, Robert Greenstein points out:
Poverty would have risen much higher without the temporary expansions in unemployment insurance benefits provided by the Recovery Act and other legislation. In 2008, unemployment benefits kept 900,000 Americans out of poverty. In 2009, by contrast, unemployment benefits kept 3.3 million Americans out of poverty, an analysis of today’s data shows. The majority of the increase in UI benefits in 2009 came from the Recovery Act.
Yet with most Republicans opposing even extending tax credits and setting up a loan fund to small business to promote hiring (that $30 billion bill passed the Senate Thursday), the sort of large-scale jobs programs favored by labor and groups like Jobs With Justice seem even further away from passage in today’s Washington. Here are the highlights of their agenda for the September 15th protests:
Today we are sending a message to Congress: If you won’t act to create jobs, maybe you don’t deserve to have job.
Full and Fair Employment. Congress must recognize the jobs emergency.
Extend the Temporary Assistance to Needy Families emergency fund jobs subsidies program.
Pass legislation like the Local Jobs for America Act, extend unemployment insurance, heed President Obama’s call to renew the countries’ infrastructure and create a national infrastructure bank, and other bills that will create jobs, protect public services, and help get our economy going again.
Wall Street must pay their fair share for the crisis they created. A tax on financial speculation could raise $200-$500 billion every year.
TAKE ACTION NOW!
It may all seem quite unrealistic in a political environment in which “stimulus” has become politically toxic and Democrats steer away from the term—and the president’s new $50 billion infrastructure plan is considered DOA.
But as JWJ spokesperson Acosta observes, “It’s been almost impossible to get anything through this Senate, but if you’re not beginning from a place of asking for bold policies, you’re not going to get bold policies.”
This article originally appeared in the Working In These Times blog.